Note 6 - Preferred Stock and Common Stock

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

Note

6.

Preferred Stock and Common Stock

Stock Split

In

April 2017,

the board of directors and the then majority shareholder approved a

1

for

10

reverse stock split (“Stock Split”) of the issued and outstanding shares of common stock of the Company. On

June 15, 2017,

the Company filed an amendment to its articles of incorporation with the Delaware Secretary of State effecting the Stock Split. The Stock Split became effective with the Financial Industry Regulatory Authority, Inc. (“FINRA”) on

June 20, 2017.

Pursuant to the Stock Split, each outstanding share of the Company’s common stock was automatically exchanged for

one

-

tenth

of a share. As a result, each stockholder now owns a reduced number of shares of the Company’s common stock. The Stock Split affects all stockholders uniformly and does

not

affect any stockholder’s percentage ownership in the company or the proportionate voting rights and other rights and preferences of the stockholders, except for adjustments that

may

result from the treatment of fractional shares, which have been rounded to the nearest whole share. The number of the Company’s authorized shares of common stock was

not

affected by the Stock Split.

Private Placement

From

February 10, 2017

through

December 31, 2017,

the Company accepted subscriptions of

$1,940,005

for unregistered shares of the Company’s common stock for

$1.50

a share (the

“2017

Private Placement”). The issuances of common stock were made in reliance on Section

4

(a)(

2

) of the Securities Act of

1933

for the offer and sale of securities

not

involving a public offering and Rule

506

(b) under the Securities Act. The proceeds from the

2017

Private Placement are being used for working capital and to fund operations. In

2017,

the Company issued

1,293,334

shares of common stock under the

2017

Private Placement, along with

2,500

shares of common stock under a prior private placement.

Preferred Stock Exchange

In

April 2017,

the Company offered our preferred shareholders shares of our common stock in exchange for their Series A cumulative preferred stock (“Preferred Stock”) and accumulated preferred dividends outstanding as of

December 31, 2016.

Pursuant to the offer, each share of Preferred Stock would be exchanged for

20

shares of (post-split) common stock and each dollar of preferred dividend would be exchanged for

0.2

shares of common stock. All preferred shareholders, except one, accepted the offer resulting in the conversion of

9,875

shares of Preferred Stock and

$301,656

of accumulated preferred dividends into

257,831

shares of common stock, which were issued in the

third

quarter of

2017.

The effective date of the exchange is

June 30, 2017.

This exchange resulted in deemed dividends on preferred stock conversion of

$148,125.

Subsequent to the reverse stock split, the private placement and the preferred stock exchange, there are

2,610,568

shares of common stock issued and outstanding, consisting of

1,056,903

shares after the reverse stock split,

1,293,334

shares from the private placement,

2,500

shares from a prior year private placement and

257,831

shares from the preferred stock and preferred dividend exchange.

Preferred Stock Dividends

The holder of Preferred Stock is entitled to receive cumulative, non-compounded cash dividends on each outstanding share of Preferred Stock at the rate of

10%

of the Issuance Price per annum (“Preferred Dividends”), which began to accrue on

January 1, 2010.

Preferred Dividends are payable semiannually to the holder of Preferred Stock. Any Preferred Dividends due and unpaid on any Payment Date, whether or

not

declared by the board of directors, shall accrue with any other due and unpaid Preferred Dividends, regardless of whether there are profits, surplus or other funds of the Company legally available for payment of dividends.

Substantially all the Preferred stockholders had previously agreed to accept common stock in lieu of cash for payment of Preferred Dividends. In

February 2016,

the Company issued

29,856

shares of common stock in lieu of

$29,249

of Preferred Dividends for those Preferred stockholders who accepted the common stock in lieu of the cash offer. The total accrued but unpaid Preferred Dividends is

$27,361

as of

December 31, 2018

and

December 31, 2017.

An additional

$10,000

and

$5,000

of cumulative Preferred Dividends are undeclared and unaccrued as of

December 31, 2018

and

2017,

respectively, and are

not

included in the balance sheet.

Common Stock

As of

December 31, 2018,

the Company’s board of directors and officers beneficially own

838,060

shares of the Company’s common stock or

32.1%

of the outstanding common stock. Included in the

838,060

shares are 

351,966

shares owned by Marino Family Holdings LLC controlled by our chairman, Gary O. Marino, and

91,348

shares owned by Banyan Rail Holdings LLC, of which Mr. Marino is the president and significant stockholder.